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2012 (10) TMI 23 - HC - Income TaxDeduction u/s 80HHC - exclusion of interest income while computing the business profits - assessee contesting for inclusion of same on ground that interest need not be from money lending business alone for it to constitute business income and if the source of funds which are invested, is from a business activity, any accretion thereto or in respect thereof, including interest, must be held to be business income - Held that:- Mere fact that an assessee carries on business would not result in an inference that the income which is earned by way of interest would fall for classification as business income. Where an assessee invests its surplus funds in order to earn interest and to obviate its funds lying idle, such income would not fall for classification as business income. This is particularly so in a situation where the business of the assessee does not consist in the investment of funds. Where the assessee engages in an independent line of business, interest earned on deposits cannot be regarded as falling under the head of profits and gains of business or profession. Such income would fall for classification as income from other sources. In applying the provisions of section 80HHC(1), the Legislature has made a specific provision for the deduction of such profits of business as are derived from the export activity. The expression “derived from” has been construed to require a direct and proximate nexus with the business of export. Absent such a nexus, the income which results from the activity would have to be excluded from reckoning for the purposes of the formula prescribed by section 80HHC. It is impossible for this Court to come to the conclusion that interest received by the assessees bears a direct and proximate relationship with their export activity. order of tribunal excluding interest income for computation of business profits for the purpose of section 80HHC is upheld. Further, merely because the Assessing officer did not re-open the assessment u/s 147 r.w.s. 148, the assessee would not be entitled to contend that they were entitled to the benefit of section 80HHC despite the conclusion of this Court that they are not entitled to the same - Decided in favor of Revenue
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